California Financier Gets 14 Years in Jail

Fox News/September 2, 2003

Los Angeles -- Financier Reed Slatkin (search), a key player in the creation of Internet service provider EarthLink Inc. (search), was sentenced Tuesday to 14 years in prison after pleading guilty to bilking investors out of hundreds of millions of dollars.

A federal court in Los Angeles also ordered Slatkin to pay more than $240 million in restitution to clients of his fund management business.

The government had asked that he be sentenced to the minimum in a range from 11 years and three months to 14 years after defrauding investors of nearly $600 million, but Judge Margaret Morrow chose the more severe option.

"The scope of the illegal activities was immense," she told a courtroom packed with attorneys and victims of Slatkin. "The havoc that the defendant has wreaked is immense, the loss is immeasurable."

The court heard arguments from Slatkin's lawyers pleading mitigating circumstances that they said should factor in a reduction in his sentence, including his cooperation with prosecutors and the resulting indictments they have gotten against Slatkin associates.

They asked the judge to impose a sentence of 6 1/2 years, which they said was fair considering the circumstances.

Appearing in prison garb with manacles around his hands and waist, Slatkin asked the court for leniency, with his lawyers saying that he had been under psychological pressure.

Referring to the 500 or so days he has already spent in federal custody, Slatkin said, "Not one of these days has gone by without (my) feeling the overwhelming responsibility for the harms I caused these people.

"The future for myself is only one of isolation and decline," he said.

Pleaded Guilty on 15 Counts

Slatkin, who had a number of celebrity and high-profile clients, had portrayed himself as a shrewd manager whose investments were outstripping the market, but prosecutors said he was actually running a Ponzi scheme.

Some of his victims recently received a distribution of about 5 percent of their losses from the ongoing proceedings involving Slatkin's estate, though prosecutors said they were worried some assets were still hidden.

"Where are his assets? Do we have everything? That's a major concern for both us and the (bankruptcy) trustee," prosecutor Steven Olson said in court.

His attorneys blamed much of his behavior on the influence of the Church of Scientology, of which he was a member and from where many of his victims came.

"There is no question that the hold the Church had on Mr. Slatkin was significant," lawyer Brian Sun told the court. "It took us a while to de-program Mr. Slatkin."

But an attorney for the Church told Reuters (search) that Slatkin's claims, and those of his lawyers, were all a ruse designed to draw attention away from his crimes.

"We were pleased the judge saw through it," said David Schindler, an attorney from the firm of Latham & Watkins who represents the Church. "It was shameful of (Slatkin). He sold the psychiatrists a bill of goods."

One of Slatkin's victims said he was happy the judge acknowledged the severity of his frauds.

"I think under the circumstances, given the reality (of the situation), we're happy the judge went higher than the government recommended," Gregory Abbott told Reuters.

But another victim said closure did not come so easy.

"It's hard for me personally to say it's over," Charles Ohl said after the sentence was pronounced.

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